Being chosen to lead and carry out a digital transformation programme is both exciting and scary, and Chief Executive Offices (CEOs) and Chief Information Officers (CIOs) who want to succeed often find it hard to overcome the barriers they experience.
With a clear understanding of the differences between transactional vs transformational leadership models, however, you’ll be able to meet your company’s expectations.
There are several different styles of leadership recognised in business these days, but two of the most common are based on transformational and transactional leadership theories developed by James Macgregor Burns and Bernard Bass. These models are almost complete opposites because while transactional leaders focus on maintaining the status quo, usually through careful organisation, staff supervision and group results, transformational leaders challenge the status quo and emphasise creating change inside an organisation.
Transactional leaders use disciplinary power and a range of incentives to encourage good employee performance. The “transaction” that takes place is the act of exchanging reward for performance.
Companies under this kind of leader usually operate smoothly, enjoy high productivity, and can deal with small operational changes easily. This makes it an effective management style for many traditional companies.
Transformational leaders, however, go beyond the day-to-day operational management and work hard towards taking their organisation to higher levels of success. Methods used to do this include promoting teamwork, inspiration and co-operation between employees at different levels, to make sure they carry out corrective actions to improve performance.
This style of leadership is really good for developing and growing small to medium-sized businesses, which need creative thinking to expand.
Both of these leadership styles have a place in successful companies. However, many organisations are now facing an urgent need for digital transformation, which often depends on making cultural changes.
The concept of transformational leadership can apply to almost every industry, including healthcare, education and government agencies, but it’s especially important in IT as companies set goals and start their journeys towards digital transformation. Adapting to quickly-changing technology takes innovation and strong leadership to stay ahead of the pack and continue to be competitive. And since digital transformation is basically about people, achieving a successful digital agenda begins by changing the mindset of a company to increase the emphasis on its people.
Research by the Harvard Business Review shows that any changes made that don’t empower employees typically don’t succeed and that empowering people through change is the only way to have the lasting digital transformation needed for companies to grow.
Transformational leadership style is based on four pillars, which can all be applied to achieving digital change in an organisation:
Transformational leaders don’t always have to be managers, either. Anyone can be (or become) a transformational leader in the field of digital disruption. The actions needed to make the shift to a digital universe effective depend to a large degree on the needs of the business and the organisational culture. In some instances, it might be necessary to use some transactional leadership methods, too.
For example, all processes across an organisation going through digital disruption will have to find new digital solutions, which could mean restructuring departments, starting to use new tools, and making changes to tasks such as:
Many of these activities are done well as a result of the structured methods of organisation and the supervision of staff by the transactional leader, which helps them to achieve their goals.
Both styles of leadership have their pros and cons, particularly when it comes to digital transformation. Transformational leadership is recognised for its ability to quickly assess a company’s situation, set goals for improvement and growth, and to create a positive work environment for the team. By using the four pillars listed above, this leadership style results in motivated and inspired workers, who typically deliver better efficiencies and results.
It can also face difficulties, though, such as a challenge with detail orientation that is obvious in transactional leadership methods. Also, transformational leaders occasionally get so passionate and excited that they overlook reality and truth, resulting in less-than-ideal use of logic and research. And not every transformational leader is good. Adolf Hitler and Osama bin Laden are both listed as examples of this type of leader because they were able to motivate followers to put aside their individual interests and work together towards a common goal.
The benefits offered by transactional leadership methods, on the other hand, include:
Disadvantages of this leadership style include the fact that it is usually viewed as “stiff” by employees, and has negative factors like job suspension and termination. It limits creativity and makes it hard for workers to present ideas that aren’t in line with existing goals, and also it discourages employees from aiming for higher positions in the company.
Employees often don’t take enough accountability and ownership, because they are given their tasks and expected to complete them within the framework provided. And since the rules usually exist for a reason and can’t easily be changed, employees have less concern for the company’s welfare than they would if they felt personally accountable for success.
Since digital transformation is fundamentally about people, getting it right mostly requires transformational leadership. Leaders might need to adapt their style, however, to account for instances when transactional leadership is needed as part of the transformation process.
Examples of this include the healthcare environment, where strict guidelines and transactional management styles apply even during a larger transformational process. This is because healthcare employees still have to operate according to fixed programs and tasks, making the environment more suitable to the transactional style. Leaders could well find themselves using a combination of transactional vs transformational leadership styles in different circumstances.
Do you understand your own type of leadership? Are you ready to take up the mantle of a transformational leader? For more information about transactional and transformational leadership styles and how the choice of style affects your success, please contact us.